HERO director could win severance pay

Even if he resigns, Ortega eligible to collect more than a year's salary

April 20, 2004|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

The director of an embattled Baltimore AIDS agency would receive more than a year's salary in severance pay even if he resigns voluntarily, according to his employment contract - a provision experts in nonprofit employment called unusual.

The contract, obtained by The Sun, also shows that Leonardo R. Ortega, executive director of Health Education Resource Organization , receives six weeks of vacation a year.

A national survey showed that few organizations of HERO's size give their executives that much vacation time.

Ortega and HERO have been under fire since the agency's deputy director told its 20-member board a month ago that Ortega paid a personal trainer with agency funds, took several thousand dollars in bonuses during tight fiscal times and lent HERO funds to another nonprofit organization whose board he leads.

The deputy, Indira Kotval, also said Ortega had improperly charged HERO for personal and travel expenses. She was fired several days after making her allegations.

Ortega, who has directed HERO for nearly 11 years, has said that the trainer, loan and bonuses were allowed by his contract with the board, which runs through the end of next year. But he did not allow a reporter to examine the document.

Ortega did not return a phone call about the contract.

The contract calls for Ortega to receive a severance package of nearly a year's salary, based on his years of service, plus a 15 percent bonus. If he is fired, he would earn about 17 months' salary. He makes $122,000 a year running an agency with a budget of about $4.5 million.

If Ortega is fired for "gross misconduct or malfeasance in office," he would receive nothing.

In an interview, board President Carlton R. Smith and Bernard S. Denick, an attorney for the nonprofit, said Ortega's contract is designed to keep a talented, longtime director in the job.

"The executive director of an organization such as this one is a stressful position, and talented people who occupy those positions are courted by agencies from throughout the country," said Denick, of the firm of Offit, Kurman, Yumkas & Denick.

"It was not servicing 3,500 clients when he joined it. It is now. One has to take into account each of those elements when reviewing his salary, his benefits and his termination package."

Several other HERO board members did not return phone calls or could not be reached for comment.

Though rare, severance packages that pay executives when they resign are not unheard of.

Former Baltimore Police Commissioner Edward T. Norris earned $137,000 in severance - a year's salary - when he quit the force in 2003 to become state police commissioner, along with an early pension.

Mayor Martin O'Malley said later that he regretted the deal, and city officials are trying to recoup the severance after Norris pleaded guilty in March to federal corruption and tax-fraud charges.

But Peter V. Berns, executive director of the Maryland Association of Nonprofit Organizations, said he had never heard of a nonprofit approving such a payment in advance for an executive who might leave on his own.

"The reality, I think, is that most nonprofit executives don't have contracts in the first instance," Berns said. "I don't recall ever seeing in another contract a severance provision that would apply if an executive voluntarily chooses to leave."

Rich Hafets, an attorney who represents nonprofit and for-profit employers as head of the labor practice at Piper Rudnick, said such agreements, though rare, are often designed to "buy out" an executive who announces early that he will resign at the end of his contract.

"If it's just a purely voluntary decision by the executive director for his own personal convenience, yes, I would say that's unusual ... unless the individual just had tremendous bargaining power coming in," Hafets said.

Daniel Borochoff, president of the American Institute of Philanthropy in Chicago, said such arrangements often aren't made clear on the public tax forms nonprofits must file disclosing executive salaries.

He noted the example of former American Red Cross President Bernardine Healy, who received $1.9 million in salary and settlements after being forced from office in 2001.

"It is a way for them to shield the salary," Borochoff said. "I would suspect this goes on a lot more than we know about."

Berns said statistics showed Ortega's vacation package was relatively generous. A 2001 national survey found that of 154 nonprofit organizations with budgets between $2 million and $5 million, only nine - or about 6 percent - gave directors that much time off.

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